Investment in recovery technology is the future, says Sigma Lithium CEO 

The next “boom” in the mining industry is going to be in recovery technology, as companies focus on making the most out of existing resources, says Ana Cabral-Gardner, co-CEO of Sigma Lithium (TSXV: SGML; NASDAQ: SGML), which is developing the large Grota do Cirilo lithium project in Brazil. 

While investing in technology that improves recoveries and allows existing resources to produce more may not seem as “sexy” as building the next big app, it is what is necessary to ensure that the planet isn’t stripped of resources, says the former investment banker.    

“(Sigma Lithium’s) recoveries are fantastic (about 66%). But they are not 100% because the technology isn’t there,” says Gardner, who spoke to The Northern Miner in an interview from Brazil. “We are hoping that materials technology can eventually solve this. It just hasn’t been the focus yet… but some key actors have started doing that.”  

As the world looks to transition away from fossil fuels and meet its net-zero goals by 2050, the demand for electric vehicles has started to rise quickly. However, this has also led to a spike in the prices of metals like lithium and nickel, used to make batteries that power the transition, due to a lack of supply. 

Sigma’s Grota do Cirilo project, which is expected to become one of the world’s largest suppliers of lithium in the next few years, hopes to both tackle the supply deficit in the market and operate in an environmentally friendly way. 

“The key thing about lithium is it’s not exactly mining,” Gardner says. “Mining is the beginning of it, the real differentiation happens on the metallurgy. The lithium product in pre-chemical form is the function of the metallurgical characteristics of what you produce.”  

Sigma has been able to improve on an existing technology for separation, purification and concentration of the lithium in the feedstock that’s mined, making the process greener.  

There are two technologies, in general, used to process lithium from its concentrate: via dense media separation (DMS) technology, which uses gravity, or flotation. Companies generally tend to use a combination of both, but Sigma will be depending upon DMS.  

‘Superior’ technology 

The Vancouver-headquartered company built a demonstration plant about four years ago that allowed it to test the different stages of the DMS and become more confident about using the method.  

“We ended up perfecting the flowsheet design solely with DMS… We have been achieving 66% recoveries. So, it’s a superior technology to a certain extent for the mineralogy we have,” Gardner says.  

Katie Lachapelle, director of equity Research at Canaccord Genuity Corp., who follows the company, echoes a similar sentiment and described Sigma’s recoveries as “quite impressive” in an interview with The Northern Miner.   

The technology, however, won’t work for every project since it depends on the characteristics of the lithium feedstock. In the case of Sigma, the feedstock has large crystals and lithium exists in large crystal form.  

“We do not have to crush to micron. We can actually crush to coarse and be successful in separation and purification,” Gardner explains. “The bonus of it is that it is an environmentally sustainable technology… It does not use chemicals to perform the separation. The flotation plant has fourteen stages and you have to grind to micron and use chemicals to perfect that.”  

In addition, the company aims to dry stack its tailings, use only renewable hydro power and completely recirculate and reuse the water in the plant.  

“The water we use comes from sewage-grade river. We have to treat it, which is expensive and that’s why we also recirculate the water till it is used in full… We want to keep it till the last drop,” she says, adding that the company is working on a way to recycle its tailings for use in ceramics.  

In terms of sustainability, the weak spot or the “Achilles heel” of a hard rock operation like the Grota do Cirilo, as Gardner puts it, is the use of diesel in mining trucks that transfer the mined products. To tackle that the company hopes to increase the use of biodiesel up to 50%. 

According to Gardner, the company’s focus on clean energy and the project’s positive technical studies are some of the reasons why it was able to “bypass three steps” in the supply chain and and ink offtake agreements to sell lithium directly to battery makers like LG Energy and Mitsui. 

“The battery makers do not use our product, but they understood the quality and green value of it and they made processing arrangements… versus them receiving the final product from the supply chain,” Gardner says.  

Analyst Lachapelle says that Sigma has put in a “lot of effort” to address environmental concerns. “Relative to peers, I would argue that a main focus for Sigma has always been ESG…the project is also located in Brazil, so it will benefit from being powered by 100% clean hydroelectricity.” 

Phased development 

The company is currently developing the first two phases of the project, located in the northeast Minas Gerais state, which will see mines built at its Xuxa and Barreiro deposits. Construction at the Xuxa deposit began in December and is likely to be completed by the end of this year. 

Based on a technical report released by the company on May 26, the two phases combined are expected to generate an after-tax net present value of US$5.1 billion and an internal rate of return of 589%. The study projected an average annual production run-rate of 531,000 tonnes of battery grade lithium and a 13-year operating life. 

In the first phase, production is projected at about 270,000 tons of battery grade lithium per year over eight years at an average all-in sustaining cost of US$459 per tonne, according to the report. Construction of the second phase is expected to begin once commissioning of the initial project begins towards the end of the year. 

Pre-production capex for the first phase has been pegged at US$111 million, while phase 2 is expected to cost about US$76 million.  

The reason behind the “incredible” numbers, says Gardner, is Sigma’s strategy of investing in green technology during the early days of the project in the mid-2010s.  

“It looks easy looking backward, but it was really hard when we tried to connect those dots,” she says.  

While Lachapelle described the capital cost to build the project as “very low” compared to peers, she believes that one would have to wait until the company starts producing, early next year, to provide a final verdict on its  success.  

In a research note to clients published on May 26, Lachapelle writes: “We continue to believe that Sigma is uniquely positioned with a Tier 1 asset, short timeline to production (<12 months), and substantial growth on the horizon. These attributes make the company a clear takeout target, in our view.” 

Gardner acknowledges that the demand for metals go through different cycles and that Sigma survived the low-lithium price phase, she expects the demand for critical minerals to continue to grow due to “structural changes” in the post-pandemic era.  

“There’s been a lot more climate consciousness coming out of this pandemic, which people believe was somehow caused by the lack of care,” says Gardner, adding that the boom has led to customers in Europe and the U.S. waiting for at least a year to buy an electric car.  

And in the long run, Gardner says that the winners in this supply chain that’s plagued by shortages will be the ones “who can produce these materials in accordance with the ethos of the consumer of that car, to whom we owe everything.”  

At press time in Toronto on May 27, Sigma’s shares were trading at closed at $23.78, up $2 or 9% for the day, within a 52-week trading range of $5.28 and $24.51.